Ex-Qwest Communications International Inc. chief Joseph Nacchio shouldn’t be allowed an income-tax deduction for the $44.6 million he forfeited after his conviction for insider trading because it would undercut his punishment, a government lawyer said.

“If we would give you a deduction for that, it would reduce the sting of the penalty,” Jacob Christensen, a Justice Department lawyer, told Judge Mary Ellen Coster Williams of the U.S. Court of Federal Claims in Washington during a hearing Tuesday on Nacchio’s lawsuit seeking a tax refund.

The forfeiture was part of a package of penalties imposed on Nacchio that also included 70 months in prison and a $19 million fine, Christensen said.

The forfeited money was the gain from Nacchio’s sale of Qwest stock based on warnings, withheld from other investors, that the company would miss revenue targets.

Thomas Gentile, an attorney for Nacchio, said the forfeited funds are tax deductible because they ultimately were used as restitution to victims of the executive’s fraud, thus different from a criminal fine.

“The government’s intention was for those funds to be used to compensate victims,” said Gentile, of Lampf Lipkind Prupis & Petigrow PA.

Christensen countered that Nacchio’s sentencing papers list the disgorged funds as forfeiture while a section covering restitution is blank.

“Labels aren’t important here,” Gentile said. “It doesn’t matter if it’s called restitution or not.” The point is that the money went to Qwest shareholders harmed by Nacchio’s actions, he said.

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